Advisers Can Help with College Savings Strategies

According
to Fidelity Investments’ 8th annual College Savings Indicator Study, parents
report that, on average, they plan to cover 64% of their children’s total
college costs. While this percentage is up from recent years (62% last year and
57% in 2012), parents remain behind in their savings efforts and are on track
to save just 28% of that goal. Parents expect their children to help pay
college expenses—an average of 35%—by tapping their own savings, income from
working part-time jobs and student loans.

Seven
out of 10 families working with a professional feel confident that they have a
good understanding of how best to save for college. The study finds parents are
looking to financial advisers for more than just help with how to invest their
college savings. More than one-third of families that use an adviser (36%) said
they would like their advisers to help them determine the share of college
costs that they and their children should bear, and two-thirds (65%) of those
who use an adviser have talked to their child about how the family will pay for
their college education.

While
parents may recognize the need to save more, many are unsure how to start.
Approximately half report they need additional education when it comes to how
best to save for college, saying they either don’t know, or need more
information about: what accounts are best to save (49%), how to invest savings
(50%) or where to go for advice about college savings (48%).

Among
all responding parents (85%) agree that their children should help contribute
to college costs, but only 57% of parents with children ages 13 and older have
talked to them about how the family will fund their education, and just
one-third (34%) have actually asked their children to start setting aside
savings.

“The
results … suggest that families are looking for help in determining ‘who should
pay for what’ when it comes to college, and that advisers can—and should—have a
larger role in these sometimes delicate family conversations,” says Matt
Golden, vice president of college savings for Fidelity Financial Advisor
Solutions.

“Working
together to talk through priorities and determine opportunities to save can
help families develop a solid, realistic plan that they can stick to—which is
imperative, given that most families need to step up their savings efforts to
help meet college goals,” Keith Bernhardt, vice president of college planning
at Fidelity adds.

Although parents need
children to take on more responsibility, they still worry about how student
loan debt may affect their child’s future. Eight out of 10 parents are
concerned that student loan debt will hinder their child’s ability to be
financially independent post-graduation, and are committed to helping. (See “When Adult Children Ask for a Loan”)

Strategies
for College Savings

According
to this year’s study, saving for college is parents’ No. 2 savings priority—just
behind saving for retirement. (See “Linking Student Debt and Retirement Savings”) The good news is the majority of
families (64%) have started saving. Of those, 35% are using a dedicated college
savings account, such as a 529 plan,
and 70% are saving monthly, reporting a median contribution of $250 per month. Ninety-three
percent of parents saving in a dedicated college account say it helps them save
and stay on track, while also separating college savings from other short-term
goals. Families using 529 accounts feel more confident about how best to save,
save more each month and are more likely to have talked to their children,
creating a family plan to pay for college.

Best
practices revealed by the survey include:

Fifty-nine
percent of parents indicated they have a plan in place to help them reach their
college goals. Those with a plan are more likely to feel on track to reach
their goal (52%) than those without (16%).

Twenty-four
percent of families have started using a rewards credit card that can help earn
money toward college savings—one either directly connected to a 529 plan, or
one earning cash back that can be earmarked for college savings.

Fidelity
says many family members would likely welcome the opportunity to support
college goals, rather than figure out the latest toy or game to buy. Its Grandparents
and College Savings Study found 90% of grandparents said if asked, they would
be likely to make a gift to college savings in lieu of traditional gifts for
birthdays, holidays or other special occasions. But, currently, only 21% of
parents report asking family and friends to consider gifting to a college fund.

Parents
report shelling out an average of $790 in monthly fees for daycare and
after-school care, and 56% of those currently paying these fees plan to
reallocate some of those dollars to college savings as kids get older.

Fidelity’s CollegeSavings Resource Center provides families a range of online planning tools and calculators, an overview
of savings options and strategies, as well as resources to learn more about how
to search and apply for financial aid and scholarships. Fidelity also provides
financial adviser clients with 529 plan information, marketing support and
online tools such as the 529 State Tax Deduction Calculator and the College
Savings Planning tool. Financial advisers can get more information at https://advisor.fidelity.com/app/home
or 1-800-544-9999.